Bill takes new bite out of income tax

AUGUSTA – Republicans in the House and Senate passed a bill early Thursday to further lower state income taxes in the future, but Democrats expressed concern that the measure will create ongoing budget deficits.

The vote on L.D. 849 came before dawn Thursday as lawmakers finished their work for the two-year session. The bill calls for the state to take money out of excess revenues to lower the income tax, but only after some of the money is used for other purposes.

Initially, a surplus larger than $40 million will be needed to have any impact on the income tax. That number will fall to $1.35 million in fiscal year 2014-15, after money the state owes is paid to hospitals and the state retirement fund.

Any money left after those expenses are paid will be divvied up by percentage, with 35 percent going to the state’s rainy day fund and 20 percent going to lower income taxes.

Other money will be set aside for capital construction, operating capital and a retirement allowance fund.

In a prepared statement, Democrats said using the one-time money for an ongoing tax cut will mean less money for schools and roads.

“This is nothing short of an unfair and unfunded tax shift onto middle-class families who are already paying enough in property taxes,” said Rep. Seth Berry, D-Bowdoinham.

But House Speaker Robert Nutting, R-Oakland, said the measure forces lawmakers to set spending priorities.

“If you have the money, it’s hard not to spend it,” he said. “It’s helpful to lower the bar whenever you can so that when you look at it next time, you already have commitments you have to make to the taxpayers so it’s not all about new programs.”

The goal of the bill is to reduce Maine’s income tax rate to 4 percent. The top bracket is now 8 percent, but it will drop to 7.95 percent in January. If the state lowers the income tax to 4 percent, state revenues will be reduced by $600 million a year, according to the Legislature’s nonpartisan fiscal office.

Gov. Paul LePage’s spokeswoman, Adrienne Bennett, said the governor will consider the bill next week.

Other bills awaiting consideration by the governor:

• L.D. 1882, which calls for the Legislature’s Veterans and Legal Affairs Committee to write legislation establishing a presidential primary in Maine. The bill came in response to well-publicized problems with the GOP caucuses this year, in which results were lost and the winner was declared before all counties had voted. The committee has until Dec. 1 to come up with a plan.

• L.D. 1705, which calls for a 13-member Task Force on the Prevention of Sexual Abuse of Children to recommend ways to increase teachers’, students’ and parents’ awareness of the problem, actions children may take if they are being abused, and available counseling.

• L.D. 1897, which would create a competitive bidding process for future casinos and slot machine facilities in Maine. The bill was amended several times, but in general, it prohibits the state from accepting applications for casinos or racinos after September of this year to give a task force time to study the issue. There is an exception for new applications from the Passamaquoddy Tribe in Washington County, which could apply for a slot machine license. It requires future project developers to pay a $250,000 nonrefundable privilege fee and a minimum license fee of $5 million.

• L.D. 1469, which allows veterans and charitable fraternal groups to have as many as five slot machines at their lodges. To operate slots, groups would have to have a cash reserve of $2,000 for each machine, pay a $5,000 refundable deposit to the state Gambling Control Board and pay an initial application fee of $1,000. Applications would be accepted by the state as of Oct. 1, 2013, and the bill would cap the total number of slot machines at 250 statewide.

One bill that will not go to the governor is L.D. 1632, which sought to ease restrictions on public employees who retire and return to work. The bill died in the House and Senate this week after Republicans no longer supported it.

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